Deck 5: Consolidated Financial Statements Intra-Entity Asset Transactions

Question 1

Poole Co. acquired 100% of Mullen Inc. on January 3, 2021. During 2021, Poole sold goods to Mullen for $2,500,000 that cost Poole $1,850,000. Mullen still owned 30% of the goods at the end of the year. Cost of goods sold was $11,200,000 for Poole and $6,600,000 for Mullen. What was consolidated cost of goods sold?

A) $15,105,000.
B) $15,300,000.
C) $15,495,000.
D) $17,800,000.
E) $17,995,000.

Answer 1

C

Question 2

On January 1, 2021, Doyle Corp. acquired 75% of the voting common stock of Bressant Inc. During the year, Doyle sold to Bressant for $510,000 goods that cost $380,000. At year-end, Bressant owned 20% of the goods transferred. Bressant reported net income of $215,000, and Doyle's net income was $902,000. Doyle decided to use the equity method to account for this investment. Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, what was the net income attributable to the noncontrolling interest?

A) $27,750.
B) $43,000.
C) $47,250.
D) $53,750.
E) $60,250.

Answer 2

D

Question 3

Macklin Co. owned 70% of Holland Corp. During 2021, Macklin sold to Holland land with a book value of $51,000. The selling price was $75,000. For purposes of the December 31, 2021 consolidated financial statements, at what amount should the land be reported?

A) $7,200.
B) $24,000.
C) $51,000.
D) $67,800.
E) $75,000.

Answer 3

C

Question 4

Beesly Co. owned all of the voting common stock of Halpert Corp. The corporations' balance sheets dated December 31, 2020, include the following balances for land: -Beesly - $461,000, and -Halpert - $265,000. On the original date of acquisition, the book value of Halpert's land was equal to its fair value. On May 2, 2021, Beesly sold to Halpert a parcel of land with a book value of $75,000. The selling price was $88,000. There were no other transfers, which affected the companies' land accounts during 2020. What is the consolidated balance for land on the 2021 balance sheet?

A) $713,000.
B) $726,000.
C) $739,000.
D) $801,000.
E) $814,000.

Question 5

Pot Co. holds 90% of the common stock of Skillet Co. During 2021, Pot reported sales of $1,120,000 and cost of goods sold of $840,000. For this same period, Skillet had sales of $420,000 and cost of goods sold of $252,000.Included in the amounts for Pot's sales were Pot's sales for merchandise to Skillet for $140,000. There were no sales from Skillet to Pot. Intra-entity transfers had the same markup as sales to outsiders. Skillet had resold all of the intra-entity transfers (purchases) from Pot to outside parties during 2021. What are consolidated sales and cost of goods sold for 2021?

A) $1,400,000 and $952,000.
B) $1,400,000 and $1,092,000.
C) $1,540,000 and $952,000.
D) $1,400,000 and $1,232,000.
E) $1,540,000 and $1,092,000.

Question 6

Milton Co. owned all of the voting common stock of Walker Co. On January 3, 2020, Milton sold equipment to Walker for $140,000. The equipment cost Clemente $165,000. At the time of the transfer, the balance in accumulated depreciation was $45,000. The equipment had a remaining useful life of five years and a $0 salvage value. Both entities use the straight-line method of depreciation.At what amount should the equipment (net of depreciation) be included in the consolidated balance sheet dated December 31, 2020?

A) $96,000.
B) $120,000.
C) $140,000.
D) $144,000.
E) $165,000.

Question 7

On January 1, 2021, Kapoor Co. sold equipment to its subsidiary, Howard Corp., for $125,000. The equipment had cost $150,000, and the balance in accumulated depreciation was $70,000. The equipment had an estimated remaining useful life of eight years and no salvage value. Both companies use straight-line depreciation. On their separate 2021 income statements, Kapoor and Howard reported depreciation expense of $86,000 and $64,000, respectively. The amount of depreciation expense on the consolidated income statement for 2021 would have been:

A) $134,375.
B) $144,375.
C) $150,000.
D) $155,625.
E) $165,625.

Question 8

Kenzie Co. acquired 70% of McCready Co. on January 1, 2021. During 2021, Kenzie made several sales of inventory to McCready. The cost and sales price of the goods were $150,000 and $220,000, respectively. McCready still owned one-fourth of the goods at the end of 2021. Consolidated cost of goods sold for 2021 was $2,280,000 due to a consolidating adjustment for intra-entity transfers less intra-entity gross profit in McCready's ending inventory.How would net income attributable to the noncontrolling interest be different if the transfers had been for the same amount and cost, but from McCready to Kenzie?

A) Net income attributable to the noncontrolling interest would have decreased by $5,250.
B) Net income attributable to the noncontrolling interest would have increased by $17,500.
C) Net income attributable to the noncontrolling interest would have increased by $10,500.
D) Net income attributable to the noncontrolling interest would have decreased by $15,750.
E) Net income attributable to the noncontrolling interest would have decreased by $52,500.

Question 9

Will Co. owned 80% of the voting common stock of Carlton Co. During 2020, Carlton made frequent sales of inventory to Will. There was deferred intra-entity gross profit of $50,000 in the beginning inventory and $30,000 of intra-entity gross profit at the end of the year. Carlton reported net income of $173,000 for 2020. Will decided to use the equity method to account for the investment. Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, what is the net income attributable to the noncontrolling interest for 2020?

A) $28,600.
B) $30,600.
C) $34,600.
D) $38,600.
E) $50,600.

Question 10

Hudson Corp. owned a 85% interest in Martin Co. Martin frequently made sales of inventory to Hudson. The sales, which include a markup over cost of 25%, were $460,000 in 2020 and $520,000 in 2021. At the end of each year, Hudson still owned 40% of the goods. Net income for Martin was $932,000 during 2021. Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, what was the net income attributable to the noncontrolling interest for 2021?

A) $128,040.
B) $137,550.
C) $139,080.
D) $139,800.
E) $151,560.

Question 11

Kenzie Co. acquired 70% of McCready Co. on January 1, 2021. During 2021, Kenzie made several sales of inventory to McCready. The cost and sales price of the goods were $150,000 and $220,000, respectively. McCready still owned one-fourth of the goods at the end of 2021. Consolidated cost of goods sold for 2021 was $2,280,000 due to a consolidating adjustment for intra-entity transfers less intra-entity gross profit in McCready's ending inventory.How would consolidated cost of goods sold have differed if the inventory transfers had been for the same amount and cost, but from McCready to Kenzie?

A) Consolidated cost of goods sold would have remained $2,280,000.
B) Consolidated cost of goods sold would have been more than $2,280,000 because of the controlling interest in the subsidiary.
C) Consolidated cost of goods sold would have been less than $2,280,000 because of the noncontrolling interest in the subsidiary.
D) Consolidated cost of goods sold would have been more than $2,280,000 because of the noncontrolling interest in the subsidiary.
E) The effect on consolidated cost of goods sold cannot be predicted from the information provided.

Question 12

Pot Co. holds 90% of the common stock of Skillet Co. During 2021, Pot reported sales of $1,120,000 and cost of goods sold of $840,000. For this same period, Skillet had sales of $420,000 and cost of goods sold of $252,000.Included in the amounts for Pot's sales were Pot's sales of merchandise to Skillet for $140,000. There were no intra-entity transfers from Skillet to Pot. Intra-entity transfers had the same markup as sales to outsiders. Skillet still held 40% of the intra-entity gross profit remaining in ending inventory at the end of 2021. What are consolidated sales and cost of goods sold, respectively for 2021?

A) $1,400,000 and $952,000.
B) $1,400,000 and $966,000.
C) $1,540,000 and $1,078,000.
D) $1,400,000 and $1,022,000.
E) $1,540,000 and $1,092,000.

Question 13

Clark Corp. owned 75% of the voting common stock of Andrew Co. On January 3, 2020, Andrew sold a parcel of land to Clark. The land had a book value of $36,000 and was sold to Clark for $52,000. Andrew's reported net income for 2020 was $123,000. Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, what is net income attributable to the noncontrolling interest?

A) $14,750.
B) $26,750.
C) $27,750.
D) $30,750.
E) $34,750.

Question 14

Milton Co. owned all of the voting common stock of Walker Co. On January 3, 2020, Milton sold equipment to Walker for $140,000. The equipment cost Clemente $165,000. At the time of the transfer, the balance in accumulated depreciation was $45,000. The equipment had a remaining useful life of five years and a $0 salvage value. Both entities use the straight-line method of depreciation.At what amount should the equipment (net of depreciation) be included in the consolidated balance sheet dated December 31, 2021?

A) $48,000.
B) $72,000.
C) $96,000.
D) $145,000.
E) $165,000.

Question 15

Flax Co. acquired 80% percent of the voting common stock of Levinson Corp. on January 1, 2021. During the year, Flax made sales of inventory to Levinson. The inventory cost Flax $275,000 and was sold to Levinson for $420,000. Levinson held $84,000 of the goods in its inventory at the end of the year. The amount of intra-entity gross profit for which recognition is deferred, and should therefore be eliminated in the consolidation process at the end of 2021, is:

A) $23,200.
B) $29,000.
C) $67,200.
D) $116,000.
E) $145,000.

Question 16

During 2020, Odyssey Co. sold inventory to its wholly-owned subsidiary, Civic Co. The inventory cost $40,000 and was sold to Lord for $58,000. For consolidation reporting purposes, when is the $18,000 intra-entity gross profit recognized?

A) When goods are transferred to a third party by Civic.
B) When Civic pays Odyssey for the goods.
C) When Odyssey sold the goods to Civic.
D) When Civic receives the goods.
E) No gain can be recognized since the transfer was between related parties.

Question 17

Prescott Inc. owned 80% of the voting common stock of Hutchins Corp. During 2021, Hutchins made several sales of inventory to Prescott. The total selling price was $190,000 and the cost was $105,000. At the end of the year, 30% of the goods were still in Prescott's inventory. Hutchins's reported net income was $320,000. Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, what was the net income attributable to the noncontrolling interest in Hutchins?

A) $47,000.
B) $58,900.
C) $64,000.
D) $69,100.
E) $90,900.

Question 18

Pot Co. holds 90% of the common stock of Skillet Co. During 2021, Pot reported sales of $1,120,000 and cost of goods sold of $840,000. For this same period, Skillet had sales of $420,000 and cost of goods sold of $252,000.Included in the amounts for Skillet's sales were intra-entity gross profits related to Skillet's intra-entity transfer of merchandise to Pot for $140,000. There were no intra-entity transfers from Pot to Skillet. Intra-entity transfers had the same markup as sales to outsiders. Pot still had 40% of the intra-entity gross profit remaining in ending inventory at the end of 2021. What are consolidated sales and cost of goods sold for 2021?

A) $1,400,000 and $952,000.
B) $1,400,000 and $966,000.
C) $1,540,000 and $1,078,000.
D) $1,400,000 and $974,400.
E) $1,540,000 and $1,092,000.

Question 19

Malone Co. owned 70% of Bernard Corp.'s common stock. During November 2021, Bernard sold merchandise to Malone for $150,000. At December 31, 2021, 40% of this merchandise remained in Malone's inventory. For 2021, gross profit percentages were 25% of sales for Malone and 30% of sales for Bernard. The amount of intra-entity gross profit remaining in ending inventory at December 31, 2021 that should be eliminated in the consolidation process is:

A) $11,250.
B) $14,400.
C) $18,000.
D) $36,000.
E) $45,000.

Question 20

Colbert Inc. acquired 100% of Stewart Manufacturing on January 2, 2020. During 2020, Colbert sold Stewart $640,000 of goods, which had cost $450,000. Stewart still owned 18% of the goods at the end of the year. In 2021, Colbert sold goods with a cost of $820,000 to Stewart for $1,000,000, and Stewart still owned 15% of the goods at year-end. For 2021, the cost of goods sold totaled $5,800,000 for Colbert, and $1,300,000 for Stewart. What was consolidated cost of goods sold for 2021?

A) $6,038,800.
B) $6,092,800.
C) $6,100,000.
D) $6,107,200.
E) $7,100,000.

Question 21

Walsh Company sells inventory to its subsidiary, Fisher Company, at a profit during 2020. With respect to one-third of the inventory sold to Fisher, Walsh accounts for it using the equity method of accounting.In the consolidation worksheet for 2020, which of the following accounts would be debited to eliminate the intra-entity transfer of inventory?

A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Fisher Company.
E) Sales.

Question 22

Walsh Company sells inventory to its subsidiary, Fisher Company, at a profit during 2020. With respect to one-third of the inventory sold to Fisher, Walsh accounts for it using the equity method of accounting.In the consolidation worksheet for 2020, which of the following accounts would be debited to eliminate unrecognized intra-entity gross profit with regard to the 2020 intra-entity transfers?

A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Fisher Company.
E) Sales.

Question 23

Strickland Company sells inventory to its parent, Carter Company, at a profit during 2020. Carter sells one-third of the inventory in 2020.In the consolidation worksheet for 2020, which of the following accounts would be credited to eliminate the intra-entity transfer of inventory?

A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Strickland Company.
E) Sales.

Question 24

Which of the following statements is true regarding an intra-entity transfer of land?

A) A loss is always recognized but a gain is deferred in a consolidated income statement.
B) A loss and a gain are deferred until the land is sold to an outside party.
C) A loss and a gain are always recognized in a consolidated income statement.
D) A gain is always recognized but a loss is deferred in a consolidated income statement.
E) Recognition of a gain or loss is deferred by adjusting stockholders' equity through comprehensive income.

Question 25

On January 1, 2021, Pride, Inc. acquired 80% of the outstanding voting common stock of Strong Corp. for $364,000. There is no active market for Strong's stock. Of this payment, $28,000 was allocated to equipment (with a five-year life) that had been undervalued on Strong's books by $35,000. Any remaining excess was attributable to goodwill, which has not been impaired.As of December 31, 2021, before preparing the consolidated worksheet, the financial statements appeared as follows: During 2021, Pride bought inventory for $112,000 and sold it to Strong for $140,000. Only half of the inventory purchase price had been remitted to Pride by Strong at year-end. As of December 31, 2021, 60% of these goods remained in the company's possession.What is the consolidated total for inventory at December 31, 2021?

A) $336,000.
B) $280,000.
C) $364,000.
D) $347,200.
E) $349,300.

Question 26

Palmer Corp. owned 80% of the outstanding common stock of Creed Inc. On January 1, 2019, Palmer acquired a building with a ten-year life for $450,000. No salvage value was anticipated and the building was to be depreciated on the straight-line basis. On January 1, 2021, Palmer sold this building to Creed for $412,000. At that time, the building had a remaining life of eight years but still no expected salvage value. For consolidation purposes, what is the Excess Depreciation (ED entry) for this building for 2021?

A) Option A.
B) Option B.
C) Option C.
D) Option D.
E) Option E.

Question 27

Walsh Company sells inventory to its subsidiary, Fisher Company, at a profit during 2020. With respect to one-third of the inventory sold to Fisher, Walsh accounts for it using the equity method of accounting.In the consolidation worksheet for 2021, which of the following accounts would be debited to eliminate unrecognized intra-entity gross profit with regard to the 2020 intra-entity transfers?

A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Fisher Company.
E) Sales.

Question 28

Strickland Company sells inventory to its parent, Carter Company, at a profit during 2020. Carter sells one-third of the inventory in 2020.In the consolidation worksheet for 2020, which of the following accounts would be debited to eliminate unrecognized intra-entity gross profit with regard to the 2020 intra-entity transfers?

A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Strickland Company.
E) Sales.

Question 29

Walsh Company sells inventory to its subsidiary, Fisher Company, at a profit during 2020. With respect to one-third of the inventory sold to Fisher, Walsh accounts for it using the equity method of accounting.In the consolidation worksheet for 2021, which of the following accounts would be credited to eliminate unrecognized intra-entity gross profit with regard to the 2020 intra-entity transfers?

A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Fisher Company.
E) Sales.

Question 30

Strickland Company sells inventory to its parent, Carter Company, at a profit during 2020. Carter sells one-third of the inventory in 2020.In the consolidation worksheet for 2020, which of the following accounts would be debited to eliminate the intra-entity transfer of inventory?

A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Strickland Company.
E) Sales.

Question 31

Strickland Company sells inventory to its parent, Carter Company, at a profit during 2020. Carter sells one-third of the inventory in 2020.In the consolidation worksheet for 2021, assuming Carter uses the initial value method of accounting for its investment in Strickland, which of the following accounts would be credited to defer recognition of intra-entity gross profit with regard to the 2020 intra-entity transfers?

A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Strickland Company.
E) Sales.

Question 32

Strickland Company sells inventory to its parent, Carter Company, at a profit during 2020. Carter sells one-third of the inventory in 2020.In the consolidation worksheet for 2021, assuming Carter uses the initial value method of accounting for its investment in Strickland, which of the following accounts would be debited to defer unrecognized intra-entity gross profit with regard to the 2020 intra-entity transfers?

A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Strickland Company.
E) Sales.

Question 33

On January 1, 2021, Pride, Inc. acquired 80% of the outstanding voting common stock of Strong Corp. for $364,000. There is no active market for Strong's stock. Of this payment, $28,000 was allocated to equipment (with a five-year life) that had been undervalued on Strong's books by $35,000. Any remaining excess was attributable to goodwill, which has not been impaired.As of December 31, 2021, before preparing the consolidated worksheet, the financial statements appeared as follows: During 2021, Pride bought inventory for $112,000 and sold it to Strong for $140,000. Only half of the inventory purchase price had been remitted to Pride by Strong at year-end. As of December 31, 2021, 60% of these goods remained in the company's possession.What is the consolidated total for equipment (net) at December 31, 2021?

A) $952,000.
B) $1,058,400.
C) $1,069,600.
D) $1,064,000.
E) $1,066,800.

Question 34

On January 1, 2021, Pride, Inc. acquired 80% of the outstanding voting common stock of Strong Corp. for $364,000. There is no active market for Strong's stock. Of this payment, $28,000 was allocated to equipment (with a five-year life) that had been undervalued on Strong's books by $35,000. Any remaining excess was attributable to goodwill, which has not been impaired.As of December 31, 2021, before preparing the consolidated worksheet, the financial statements appeared as follows: During 2021, Pride bought inventory for $112,000 and sold it to Strong for $140,000. Only half of the inventory purchase price had been remitted to Pride by Strong at year-end. As of December 31, 2021, 60% of these goods remained in the company's possession.What is the total of consolidated revenues at December 31, 2021?

A) $700,000.
B) $644,000.
C) $588,000.
D) $560,000.
E) $840,000.

Question 35

Walsh Company sells inventory to its subsidiary, Fisher Company, at a profit during 2020. With respect to one-third of the inventory sold to Fisher, Walsh accounts for it using the equity method of accounting.In the consolidation worksheet for 2020, which of the following accounts would be credited to eliminate unrecognized intra-entity gross profit with regard to the 2020 intra-entity transfers?

A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Fisher Company.
E) Sales.

Question 36

Walsh Company sells inventory to its subsidiary, Fisher Company, at a profit during 2020. With respect to one-third of the inventory sold to Fisher, Walsh accounts for it using the equity method of accounting.In the consolidation worksheet for 2020, which of the following accounts would be credited to eliminate the intra-entity transfer of inventory?

A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Fisher Company.
E) Sales.

Question 37

On January 1, 2021, Pride, Inc. acquired 80% of the outstanding voting common stock of Strong Corp. for $364,000. There is no active market for Strong's stock. Of this payment, $28,000 was allocated to equipment (with a five-year life) that had been undervalued on Strong's books by $35,000. Any remaining excess was attributable to goodwill, which has not been impaired.As of December 31, 2021, before preparing the consolidated worksheet, the financial statements appeared as follows: During 2021, Pride bought inventory for $112,000 and sold it to Strong for $140,000. Only half of the inventory purchase price had been remitted to Pride by Strong at year-end. As of December 31, 2021, 60% of these goods remained in the company's possession.What is the consolidated total of noncontrolling interest at December 31, 2021?

A) $100,800.
B) $97,440.
C) $93,800.
D) $120,400.
E) $117,040.

Question 38

On January 1, 2021, Pride, Inc. acquired 80% of the outstanding voting common stock of Strong Corp. for $364,000. There is no active market for Strong's stock. Of this payment, $28,000 was allocated to equipment (with a five-year life) that had been undervalued on Strong's books by $35,000. Any remaining excess was attributable to goodwill, which has not been impaired.As of December 31, 2021, before preparing the consolidated worksheet, the financial statements appeared as follows: During 2021, Pride bought inventory for $112,000 and sold it to Strong for $140,000. Only half of the inventory purchase price had been remitted to Pride by Strong at year-end. As of December 31, 2021, 60% of these goods remained in the company's possession.What is the total of consolidated cost of goods sold at December 31, 2021?

A) $196,000.
B) $212,800.
C) $184,800.
D) $203,000.
E) $168,000.

Question 39

On January 1, 2021, Pride, Inc. acquired 80% of the outstanding voting common stock of Strong Corp. for $364,000. There is no active market for Strong's stock. Of this payment, $28,000 was allocated to equipment (with a five-year life) that had been undervalued on Strong's books by $35,000. Any remaining excess was attributable to goodwill, which has not been impaired.As of December 31, 2021, before preparing the consolidated worksheet, the financial statements appeared as follows: During 2021, Pride bought inventory for $112,000 and sold it to Strong for $140,000. Only half of the inventory purchase price had been remitted to Pride by Strong at year-end. As of December 31, 2021, 60% of these goods remained in the company's possession.What is the total of consolidated operating expenses at December 31, 2021?

A) $42,000.
B) $47,600.
C) $53,200.
D) $49,000.
E) $35,000.

Question 40

Strickland Company sells inventory to its parent, Carter Company, at a profit during 2020. Carter sells one-third of the inventory in 2020.In the consolidation worksheet for 2020, which of the following accounts would be credited to defer unrecognized intra-entity gross profit with regard to the 2020 intra-entity transfers?

A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Strickland Company.
E) Sales.

Question 41

Anderson Company, a 90% owned subsidiary of Philbin Corporation, transfers inventory to Philbin at a 25% gross profit rate. The following data are available pertaining specifically to Philbin's intra-entity purchases from Anderson. Anderson was acquired on January 1, 2020. Assume the equity method is used. The following data are available pertaining to Anderson's income and dividends. Compute the equity in earnings of Anderson reported on Philbin's books for 2020.

A) $63,000.
B) $62,730.
C) $63,270.
D) $70,000.
E) $62,700.

Question 42

Anderson Company, a 90% owned subsidiary of Philbin Corporation, transfers inventory to Philbin at a 25% gross profit rate. The following data are available pertaining specifically to Philbin's intra-entity purchases from Anderson. Anderson was acquired on January 1, 2020. Assume the equity method is used. The following data are available pertaining to Anderson's income and dividends. Compute the equity in earnings of Anderson reported on Philbin's books for 2021.

A) $76,500.
B) $77,130.
C) $75,870.
D) $75,600.
E) $75,800.

Question 43

Which of the following statements is true concerning an intra-entity transfer of a depreciable asset?

A) Net income attributable to the noncontrolling interest is never affected by a gain on the transfer.
B) Net income attributable to the noncontrolling interest is always affected by a gain on the transfer.
C) Net income attributable to the noncontrolling interest is affected by a downstream gain only.
D) Net income attributable to the noncontrolling interest is affected only when the transfer is upstream.
E) Net income attributable to the noncontrolling interest is increased by an upstream gain in the year of transfer.

Question 44

Anderson Company, a 90% owned subsidiary of Philbin Corporation, transfers inventory to Philbin at a 25% gross profit rate. The following data are available pertaining specifically to Philbin's intra-entity purchases from Anderson. Anderson was acquired on January 1, 2020. Assume the equity method is used. The following data are available pertaining to Anderson's income and dividends. For consolidation purposes, what amount would be debited to cost of goods sold for the 2022 consolidation worksheet with regard to the unrecognized intra-entity gross profit remaining in ending inventory with respect to the 2022 intra-entity transfer of merchandise?

A) $600.
B) $750.
C) $3,760.
D) $3,000.
E) $675.

Question 45

Anderson Company, a 90% owned subsidiary of Philbin Corporation, transfers inventory to Philbin at a 25% gross profit rate. The following data are available pertaining specifically to Philbin's intra-entity purchases from Anderson. Anderson was acquired on January 1, 2020. Assume the equity method is used. The following data are available pertaining to Anderson's income and dividends. For consolidation purposes, what amount would be debited to January 1 retained earnings for the 2021 consolidation worksheet entry with regard to the unrecognized intra-entity gross profit remaining in ending inventory with respect to the 2020 intra-entity transfer of merchandise?

A) $240
B) $300.
C) $2,000.
D) $1,600.
E) $270.

Question 46

An intra-entity transfer took place whereby the book value exceeded the transfer price of a depreciable asset. Which statement is true for the year after the year of transfer?

A) A worksheet entry is made with a debit to retained earnings for an upstream transfer.
B) A worksheet entry is made with a credit to retained earnings for an upstream transfer.
C) A worksheet entry is made with a debit to retained earnings for a downstream transfer.
D) A worksheet entry is made with a debit to investment in subsidiary for a downstream transfer.
E) No worksheet entry is necessary.

Question 47

Anderson Company, a 90% owned subsidiary of Philbin Corporation, transfers inventory to Philbin at a 25% gross profit rate. The following data are available pertaining specifically to Philbin's intra-entity purchases from Anderson. Anderson was acquired on January 1, 2020. Assume the equity method is used. The following data are available pertaining to Anderson's income and dividends. For consolidation purposes, what amount would be debited to cost of goods sold for the 2021 consolidation worksheet with regard to the unrecognized intra-entity gross profit remaining in ending inventory with respect to the 2021 transfer of merchandise?

A) $1,000.
B) $800.
C) $3,000.
D) $2,400.
E) $900.

Question 48

An intra-entity transfer of a depreciable asset took place whereby the transfer price exceeded the book value of the asset. Which statement is true with respect to the year following the year in which the transfer occurred?

A) A worksheet entry is made with a debit to gain for a downstream transfer.
B) A worksheet entry is made with a debit to gain for an upstream transfer.
C) A worksheet entry is made with a debit to investment in subsidiary for a downstream transfer when the parent uses the equity method.
D) A worksheet entry is made with a debit to retained earnings for a downstream transfer, regardless of the method used account for the investment.
E) No worksheet entry is necessary.

Question 49

An intra-entity transfer took place whereby the transfer price was less than the book value of a depreciable asset. Which statement is true for the year subsequent to the year of transfer?

A) A worksheet entry is made with a debit to investment in subsidiary for an upstream transfer.
B) A worksheet entry is made with a debit to investment in subsidiary for a downstream transfer.
C) A worksheet entry is made with a credit to investment in subsidiary for a downstream transfer when the parent uses the equity method.
D) A worksheet entry is made with a debit to retained earnings for an upstream transfer, regardless of the method used to account for the investment.
E) No worksheet entry is necessary.

Question 50

Patti Company owns 80% of the common stock of Shannon, Inc. In the current year, Patti reports sales of $10,000,000 and cost of goods sold of $7,500,000. For the same period, Shannon has sales of $200,000 and cost of goods sold of $160,000. During the year, Patti sold merchandise to Shannon for $60,000 at a price based on the normal markup. At the end of the year, Shannon still possesses 30 percent of this inventory.Compute consolidated cost of goods sold.

A) $7,500,000.
B) $7,600,000.
C) $7,615,000.
D) $7,604,500.
E) $7,660,000.

Question 51

Parent sold land to its subsidiary resulting in a gain in 2019, the year of transfer. The subsidiary sold the land to an unrelated third party for a gain in 2022. Which of the following statements is true?

A) A gain will be recognized in the consolidated income statement in 2019.
B) A gain will be recognized in the consolidated income statement in 2022.
C) No gain will be recognized in the 2022 consolidated income statement.
D) Only the parent company will recognize a gain in 2022.
E) The subsidiary will recognize a gain in 2019.

Question 52

Patti Company owns 80% of the common stock of Shannon, Inc. In the current year, Patti reports sales of $10,000,000 and cost of goods sold of $7,500,000. For the same period, Shannon has sales of $200,000 and cost of goods sold of $160,000. During the year, Patti sold merchandise to Shannon for $60,000 at a price based on the normal markup. At the end of the year, Shannon still possesses 30 percent of this inventory.Compute consolidated sales.

A) $10,000,000.
B) $10,126,000.
C) $10,140,000.
D) $10,200,000.
E) $10,260,000.

Question 53

Patti Company owns 80% of the common stock of Shannon, Inc. In the current year, Patti reports sales of $10,000,000 and cost of goods sold of $7,500,000. For the same period, Shannon has sales of $200,000 and cost of goods sold of $160,000. During the year, Patti sold merchandise to Shannon for $60,000 at a price based on the normal markup. At the end of the year, Shannon still possesses 30 percent of this inventory.Assume the same information, except Shannon sold inventory to Patti. Compute consolidated sales.

A) $10,000,000.
B) $10,126,000.
C) $10,140,000.
D) $10,200,000.
E) $10,260,000.

Question 54

Anderson Company, a 90% owned subsidiary of Philbin Corporation, transfers inventory to Philbin at a 25% gross profit rate. The following data are available pertaining specifically to Philbin's intra-entity purchases from Anderson. Anderson was acquired on January 1, 2020. Assume the equity method is used. The following data are available pertaining to Anderson's income and dividends. Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, compute the net income attributable to the noncontrolling interest of Anderson for 2021.

A) $8,500.
B) $8,570.
C) $8,430.
D) $8,400.
E) $7,580.

Question 55

Anderson Company, a 90% owned subsidiary of Philbin Corporation, transfers inventory to Philbin at a 25% gross profit rate. The following data are available pertaining specifically to Philbin's intra-entity purchases from Anderson. Anderson was acquired on January 1, 2020. Assume the equity method is used. The following data are available pertaining to Anderson's income and dividends. Compute the equity in earnings of Anderson reported on Philbin's books for 2022.

A) $84,600.
B) $84,375.
C) $83,925.
D) $84,825.
E) $84,850.

Question 56

Anderson Company, a 90% owned subsidiary of Philbin Corporation, transfers inventory to Philbin at a 25% gross profit rate. The following data are available pertaining specifically to Philbin's intra-entity purchases from Anderson. Anderson was acquired on January 1, 2020. Assume the equity method is used. The following data are available pertaining to Anderson's income and dividends. For consolidation purposes, what amount would be debited to January 1 retained earnings for the 2022 consolidation worksheet entry with regard to the unrecognized intra-entity gross profit remaining in ending inventory with respect to the 2021 intra-entity transfer of merchandise?

A) $3,000.
B) $2,400.
C) $1,000.
D) $800.
E) $900.

Question 57

Anderson Company, a 90% owned subsidiary of Philbin Corporation, transfers inventory to Philbin at a 25% gross profit rate. The following data are available pertaining specifically to Philbin's intra-entity purchases from Anderson. Anderson was acquired on January 1, 2020. Assume the equity method is used. The following data are available pertaining to Anderson's income and dividends. For consolidation purposes, what amount would be debited to January 1 retained earnings for the 2020 consolidation worksheet entry with regard to the unrecognized intra-entity gross profit remaining in ending inventory with respect to the 2020 intra-entity transfer of merchandise?

A) $0.
B) $1,600.
C) $300.
D) $240.
E) $270.

Question 58

Anderson Company, a 90% owned subsidiary of Philbin Corporation, transfers inventory to Philbin at a 25% gross profit rate. The following data are available pertaining specifically to Philbin's intra-entity purchases from Anderson. Anderson was acquired on January 1, 2020. Assume the equity method is used. The following data are available pertaining to Anderson's income and dividends. For consolidation purposes, what amount would be debited to cost of goods sold for the 2020 consolidation worksheet with regard to unrecognized intra-entity gross profit remaining in ending inventory with respect to the transfer of merchandise?

A) $300.
B) $240.
C) $2,000.
D) $1,600.
E) $270.

Question 59

Anderson Company, a 90% owned subsidiary of Philbin Corporation, transfers inventory to Philbin at a 25% gross profit rate. The following data are available pertaining specifically to Philbin's intra-entity purchases from Anderson. Anderson was acquired on January 1, 2020. Assume the equity method is used. The following data are available pertaining to Anderson's income and dividends. Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, compute the net income attributable to the noncontrolling interest of Anderson for 2020.

A) $6,970.
B) $7,000.
C) $7,030.
D) $6,270.
E) $6,230.

Question 60

Anderson Company, a 90% owned subsidiary of Philbin Corporation, transfers inventory to Philbin at a 25% gross profit rate. The following data are available pertaining specifically to Philbin's intra-entity purchases from Anderson. Anderson was acquired on January 1, 2020. Assume the equity method is used. The following data are available pertaining to Anderson's income and dividends. Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, compute the net income attributable to the noncontrolling interest of Anderson for 2022.

A) $9,400.
B) $9,375.
C) $9,425.
D) $9,325.
E) $8,485.

Question 61

Stiller Company, an 80% owned subsidiary of Leo Company, purchased land from Leo on March 1, 2020, for $75,000. The land originally cost Leo $60,000. Stiller reported net income of $125,000 and $140,000 for 2020 and 2021, respectively. Leo uses the equity method to account for its investment.Assuming there are no excess amortizations or other intra-entity transactions, compute income from Stiller on Leo's books for 2021.

A) $140,000.
B) $97,000.
C) $125,000.
D) $100,000.
E) $112,000.

Question 62

Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker on May 1, 2020, for $80,000. The land originally cost Stark $85,000. Stark reported net income of $200,000, $180,000, and $220,000 for 2020, 2021, and 2022, respectively. Parker sold the land purchased from Stark for $92,000 in 2022. Both companies use the equity method of accounting.Which of the following will be included in a consolidation entry for 2021?

A) Debit Retained Earnings for $5,000.
B) Credit Retained Earnings for $5,000.
C) Debit Investment in Subsidiary for $5,000.
D) Credit Investment in Subsidiary for $5,000.
E) Credit Land for $5,000.

Question 63

Wilson owned equipment with an estimated life of 10 years when the equipment was acquired for an original cost of $80,000. The equipment had a book value of $50,000 at January 1, 2020. On January 1, 2020, Wilson realized that the useful life of the equipment was longer than originally anticipated, at ten remaining years.On April 1, 2020 Simon Company, a 90% owned subsidiary of Wilson Company, bought the equipment from Wilson for $68,250 and for depreciation purposes used the estimated remaining life as of that date. The following data are available pertaining to Simon's income and dividends declared: Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, compute Wilson's share of income from Simon for consolidation for 2021.

A) $108,000.
B) $110,000.
C) $106,000.
D) $109,825.
E) $109,800.

Question 64

Stiller Company, an 80% owned subsidiary of Leo Company, purchased land from Leo on March 1, 2020, for $75,000. The land originally cost Leo $60,000. Stiller reported net income of $125,000 and $140,000 for 2020 and 2021, respectively. Leo uses the equity method to account for its investment.Assuming there are no excess amortizations or other intra-entity transactions, compute income from Stiller on Leo's books for 2020.

A) $110,000.
B) $100,000.
C) $125,000.
D) $85,000.
E) $88,000.

Question 65

On January 1, 2020, Smeder Company, an 80% owned subsidiary of Collins, Inc., transferred equipment with a 10-year life (six of which remain with no salvage value) to Collins in exchange for $84,000 cash. At the date of transfer, Smeder's records carried the equipment at a cost of $120,000 less accumulated depreciation of $48,000. Straight-line depreciation is used. Smeder reported net income of $28,000 and $32,000 for 2020 and 2021, respectively. All net income effects of the intra-entity transfer are attributed to the seller for consolidation purposes.What is the net effect on net income as a result of consolidating adjustments made in 2020 with respect to the equipment transfer?

A) Increase net income by $2,000.
B) Decrease net income by $12,000.
C) Decrease net income by $10,000.
D) Decrease net income by $14,000.
E) Increase net income by $10,000.

Question 66

Wilson owned equipment with an estimated life of 10 years when the equipment was acquired for an original cost of $80,000. The equipment had a book value of $50,000 at January 1, 2020. On January 1, 2020, Wilson realized that the useful life of the equipment was longer than originally anticipated, at ten remaining years.On April 1, 2020 Simon Company, a 90% owned subsidiary of Wilson Company, bought the equipment from Wilson for $68,250 and for depreciation purposes used the estimated remaining life as of that date. The following data are available pertaining to Simon's income and dividends declared: Compute the amortization of gain through a depreciation adjustment for 2021 for consolidation purposes.

A) $1,950.
B) $1,825.
C) $2,000.
D) $1,500.
E) $7,000.

Question 67

On January 1, 2020, Smeder Company, an 80% owned subsidiary of Collins, Inc., transferred equipment with a 10-year life (six of which remain with no salvage value) to Collins in exchange for $84,000 cash. At the date of transfer, Smeder's records carried the equipment at a cost of $120,000 less accumulated depreciation of $48,000. Straight-line depreciation is used. Smeder reported net income of $28,000 and $32,000 for 2020 and 2021, respectively. All net income effects of the intra-entity transfer are attributed to the seller for consolidation purposes.Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, what amount of this gain should be recognized for consolidation purposes for 2020?

A) $12,000.
B) $9,600.
C) $8,400.
D) $2,000.
E) $1,200.

Question 68

Wilson owned equipment with an estimated life of 10 years when the equipment was acquired for an original cost of $80,000. The equipment had a book value of $50,000 at January 1, 2020. On January 1, 2020, Wilson realized that the useful life of the equipment was longer than originally anticipated, at ten remaining years.On April 1, 2020 Simon Company, a 90% owned subsidiary of Wilson Company, bought the equipment from Wilson for $68,250 and for depreciation purposes used the estimated remaining life as of that date. The following data are available pertaining to Simon's income and dividends declared: Compute the amortization of gain through a depreciation adjustment for 2020 for consolidation purposes.

A) $1,950.
B) $1,825.
C) $1,500.
D) $2,000.
E) $5,250.

Question 69

Stiller Company, an 80% owned subsidiary of Leo Company, purchased land from Leo on March 1, 2020, for $75,000. The land originally cost Leo $60,000. Stiller reported net income of $125,000 and $140,000 for 2020 and 2021, respectively. Leo uses the equity method to account for its investment.On a consolidation worksheet, having used the equity method, what adjustment would be made for 2021 regarding the land transfer?

A) Debit retained earnings for $15,000.
B) Credit retained earnings for $15,000.
C) Debit retained earnings for $50,000.
D) Credit retained earnings for $50,000.
E) Debit investment in Stiller for $15,000.

Question 70

Stiller Company, an 80% owned subsidiary of Leo Company, purchased land from Leo on March 1, 2020, for $75,000. The land originally cost Leo $60,000. Stiller reported net income of $125,000 and $140,000 for 2020 and 2021, respectively. Leo uses the equity method to account for its investment.Compute the gain or loss on the intra-entity transfer of land that should be reported on the books of Leo prior to consolidation.

A) $15,000 loss.
B) $15,000 gain.
C) $50,000 loss.
D) $50,000 gain.
E) $65,000 gain.

Question 71

Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker on May 1, 2020, for $80,000. The land originally cost Stark $85,000. Stark reported net income of $200,000, $180,000, and $220,000 for 2020, 2021, and 2022, respectively. Parker sold the land purchased from Stark for $92,000 in 2022. Both companies use the equity method of accounting.Compute the gain or loss reported on Stark's books prior to consolidation from the intra-entity transfer of land in 2020.

A) $80,000 gain.
B) $80,000 loss.
C) $5,000 gain.
D) $5,000 loss.
E) $85,000 loss.

Question 72

On January 1, 2020, Smeder Company, an 80% owned subsidiary of Collins, Inc., transferred equipment with a 10-year life (six of which remain with no salvage value) to Collins in exchange for $84,000 cash. At the date of transfer, Smeder's records carried the equipment at a cost of $120,000 less accumulated depreciation of $48,000. Straight-line depreciation is used. Smeder reported net income of $28,000 and $32,000 for 2020 and 2021, respectively. All net income effects of the intra-entity transfer are attributed to the seller for consolidation purposes.For consolidation purposes, what net debit or credit will be made for the year 2020 relating to the accumulated depreciation for the equipment transfer?

A) Debit accumulated depreciation, $46,000.
B) Debit accumulated depreciation, $48,000.
C) Credit accumulated depreciation, $48,000.
D) Credit accumulated depreciation, $46,000.
E) Debit accumulated depreciation, $2,000.

Question 73

Wilson owned equipment with an estimated life of 10 years when the equipment was acquired for an original cost of $80,000. The equipment had a book value of $50,000 at January 1, 2020. On January 1, 2020, Wilson realized that the useful life of the equipment was longer than originally anticipated, at ten remaining years.On April 1, 2020 Simon Company, a 90% owned subsidiary of Wilson Company, bought the equipment from Wilson for $68,250 and for depreciation purposes used the estimated remaining life as of that date. The following data are available pertaining to Simon's income and dividends declared: Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, compute Wilson's share of income from Simon for consolidation for 2022.

A) $118,825.
B) $115,000.
C) $117,000.
D) $119,000.
E) $118,800.

Question 74

Stiller Company, an 80% owned subsidiary of Leo Company, purchased land from Leo on March 1, 2020, for $75,000. The land originally cost Leo $60,000. Stiller reported net income of $125,000 and $140,000 for 2020 and 2021, respectively. Leo uses the equity method to account for its investment.On a consolidation worksheet, what adjustment would be made for 2020 regarding the land transfer?

A) Debit gain for $50,000.
B) Credit gain for $50,000.
C) Debit land for $15,000.
D) Credit land for $15,000.
E) Credit gain for $15,000.

Question 75

On January 1, 2020, Smeder Company, an 80% owned subsidiary of Collins, Inc., transferred equipment with a 10-year life (six of which remain with no salvage value) to Collins in exchange for $84,000 cash. At the date of transfer, Smeder's records carried the equipment at a cost of $120,000 less accumulated depreciation of $48,000. Straight-line depreciation is used. Smeder reported net income of $28,000 and $32,000 for 2020 and 2021, respectively. All net income effects of the intra-entity transfer are attributed to the seller for consolidation purposes.What amount of gain should be reported by Smeder Company relating to the equipment for 2020 prior to making consolidating entries?

A) $36,000.
B) $34,000.
C) $12,000.
D) $10,000.
E) $0.

Question 76

Wilson owned equipment with an estimated life of 10 years when the equipment was acquired for an original cost of $80,000. The equipment had a book value of $50,000 at January 1, 2020. On January 1, 2020, Wilson realized that the useful life of the equipment was longer than originally anticipated, at ten remaining years.On April 1, 2020 Simon Company, a 90% owned subsidiary of Wilson Company, bought the equipment from Wilson for $68,250 and for depreciation purposes used the estimated remaining life as of that date. The following data are available pertaining to Simon's income and dividends declared: Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, compute Wilson's share of income from Simon for consolidation for 2020.

A) $72,000.
B) $90,000.
C) $73,575.
D) $73,800.
E) $72,500.

Question 77

Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker on May 1, 2020, for $80,000. The land originally cost Stark $85,000. Stark reported net income of $200,000, $180,000, and $220,000 for 2020, 2021, and 2022, respectively. Parker sold the land purchased from Stark for $92,000 in 2022. Both companies use the equity method of accounting.Assuming there are no excess amortizations or other intra-entity transactions, compute income from Stark reported on Parker's books for 2020.

A) $205,000.
B) $200,000.
C) $180,000.
D) $175,500.
E) $184,500.

Question 78

Wilson owned equipment with an estimated life of 10 years when the equipment was acquired for an original cost of $80,000. The equipment had a book value of $50,000 at January 1, 2020. On January 1, 2020, Wilson realized that the useful life of the equipment was longer than originally anticipated, at ten remaining years.On April 1, 2020 Simon Company, a 90% owned subsidiary of Wilson Company, bought the equipment from Wilson for $68,250 and for depreciation purposes used the estimated remaining life as of that date. The following data are available pertaining to Simon's income and dividends declared: What amount should be recorded on Wilson's books in 2020 as gain on the transfer of equipment, prior to preparing consolidating entries?

A) $19,500.
B) $18,250.
C) $11,750.
D) $38,250.
E) $37,500.

Question 79

Wilson owned equipment with an estimated life of 10 years when the equipment was acquired for an original cost of $80,000. The equipment had a book value of $50,000 at January 1, 2020. On January 1, 2020, Wilson realized that the useful life of the equipment was longer than originally anticipated, at ten remaining years.On April 1, 2020 Simon Company, a 90% owned subsidiary of Wilson Company, bought the equipment from Wilson for $68,250 and for depreciation purposes used the estimated remaining life as of that date. The following data are available pertaining to Simon's income and dividends declared: Compute the amortization of gain through a depreciation adjustment for 2022 for consolidation purposes.

A) $1,925.
B) $1,825.
C) $2,000.
D) $1,500.
E) $7,000.

Question 80

Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker on May 1, 2020, for $80,000. The land originally cost Stark $85,000. Stark reported net income of $200,000, $180,000, and $220,000 for 2020, 2021, and 2022, respectively. Parker sold the land purchased from Stark for $92,000 in 2022. Both companies use the equity method of accounting.Which of the following will be included in a consolidation entry for 2020?

A) Debit Loss on Sale of Land for $5,000.
B) Credit Loss on Sale of Land for $5,000.
C) Debit Land for $5,000.
D) Debit Retained Earnings for $5,000.
E) Credit Gain on Sale of Land for $5,000.